A corollary to “Focus on What Matters,” understanding the axis you compete on is an important trait in any good entrepreneur. The inability to focus on the competitive edge that justifies your product or service’s end cost has sunk many organizations in the critical stages of their development. I’ve seen this time and time again and have been guilty of it myself on more than one occasion!
We live in an increasingly more specialized society and economy – we no longer want a Virtual Private Server; we want an unmanaged VPS under $20/month running Fedora Core located in Dallas with 5 IP addresses and partial physical access through a ticketing system. We’re not interested in hiring programmers/developers – we want a developer who specializes in MySQL design/administration, thorough understanding of Rails 3, and experience with Joomla, Drupal, and Magento.
The failure to compete on an axis with a low barrier to entry is what ruins most small business ideas. However, for those small businesses that get off the ground and start competing in their niche, they eventually start to think bigger – and why not? There’s nothing wrong with future planning for an entrepreneur; it is the hallmark of a smart businessman. The smart entrepreneur has an exit strategy and a general – if not malleable – 3-year plan for his organization.
But don’t confuse this future planning with the generalization of your niche; this is the death knell for most organizations that get too ambitious. Most small businesses dominate because they have low overhead, smart planning, patient executives, and most of all – completely rule their niche and everything that connects to it!
Example of the Failure to Understand the Relevant Axis of Competition
An organization I did some consulting for that fell for this trap: The small business was in the black year after year and experienced phenomenal growth because they were smart enough (and lucky enough) to pick an unexplored niche that would eventually blossom. Throughout the process, they accumulated a lot of technical debt even though the extent of the technology involved posting data from a web form to a database and manipulating that data on the back end for marketing/financial purposes. The response to the growing technical debt wasn’t to simplify the process, but rather to expand and try and compete on the Axis of Technology.
But this was a huge mistake – the company competed on the Axis of Marketing and had a large economic First Mover advantage. Remember, the entire extent of the technical interactions of the company involved posting data from a web form, storing it into a database, and manipulating said data. Marketing specialists tracked SEO-related data and made projections from these posts and sales people used the data to show off the dominance of the company in this small industry. To make such a huge paradigm shift in an attempt to compete on the Axis of Technology made no sense – the company did not succeed because of its superior technology department, but rather because of the first mover advantage and a solid foundation of sales/marketing.
They ported their technology to a more complicated and expensive platform, changing the base language everything was programmed in, and completely overhauled the existing database, requiring a giant migration of the data to the new schema. They hired all new developers and executive staff to oversee the change, leaving the Sales and Marketing departments in the dust – making huge promises that could never be met due to the technical debt that had accumulated and the problems that would invariably crop up as a result of trying to migrate millions of rows of poorly laid-out data into a brand new invented schema.
The organization was able to make these changes because they promised the moon to the business units – unification of tools, better access to data, and faster reports!
It didn’t happen: The migration was an enormous failure, the implementation of a more complicated programming foundation flopped, the tools became worse, and sales have been steadily dropping while company morale plunged.
Due to the fractured database structure, the organization now maintains a legacy database and a post-migration database – both of which have differing schemas and do not blend whatsoever. Their products exist on two platforms and all new employees must learn two separate systems, both of which have rapid changes inflicted on them due to exponentially-increasing technical debt.
All of this happened because the organization failed to understand what axis it competed on, and tried to get too fancy. In this age of specialization, right-pricing, and cheap outsourced labor, you simply cannot afford to make these types of mistakes and hope to remain relevant – or even solvent – in today’s economy.